Discussions on carbon pricing in Brazil lean towards ETS

On 23 December 2019, the Brazilian Ministry of Economy announced advances in discussions about carbon pricing in Brazil.

The announcement reported on a meeting held between the Ministry of Economy, the World Bank, and the Brazilian Business Council for Sustainable Development (CEBDS). Participants at the meeting affirmed “the importance of avoiding the creation of new taxes (…)” and “pledged to accelerate studies on the creation of a carbon pricing system based on national greenhouse gas emissions trading”. Brazil had been considering both carbon taxes and an ETS for the country; the announcement thus signals strong preference for an ETS.

Strong emphasis was placed on competitiveness matters. The announcement highlighted that the system should include “protection arrangements and promotion of the international competitiveness of Brazilian companies”, while noting that a carbon market could lead to increased investments linked to clean technologies in the country – fostering innovation, creating new jobs, reducing pollution, and strengthening the Brazilian economy.

Brazil’s efforts have been supported by the World Bank’s Partnership for Market Readiness since 2015. Going forward, activities will include further technical work, as well as public consultations. 

In its Nationally Determined Contribution under the Paris Agreement, Brazil pledged to a 37% reduction below 2005 levels by 2025, with an indicative contribution of 43% below 2005 by 2030. As per the 2015 inventory, emissions in Brazil (excl. LULUCF) stem primarily from energy and agriculture sectors, with roughly 40% each.